Business

6:46 am

Wed March 5, 2014

Obama's Budget: Magic Wand Or Club?

President Barack Obama delivers remarks on his 2015 budget plan Tuesday at Powell Elementary School in Washington.

PoolGetty Images

Think of the budget plan released Tuesday by President Obama as a magic wand. If he could wave it and make every line come true, how would the U.S. economy look?

Like this:

Wealthier Americans would be paying more in taxes, while poorer ones would be getting new tax credits. More roads would be under construction and scientists would be receiving more funding. Smokers would be paying more in taxes to allow four-year-olds to attend preschool.

Obama's focus is on job creation, job training and education — and he would pay for changes by imposing higher taxes.

But Republicans don't see a magic wand. They view the White House budget as a club that will beat down the economy with heavier taxes.

The Obama plan "would demand that families pay more, so Washington can spend more," House Budget Committee Chairman Paul Ryan, R-Wis., said Tuesday in a statement. "Republicans believe in a different vision."

On Monday, Ryan released a report suggesting that the government eliminate funding for many poverty programs he says have failed.

So are the two economic visions really so different? How?

Alan Viard, a fellow at the American Enterprise Institute and a former staff economist for the George W. Bush administration, said he does see immense differences between Obama's and Ryan's fiscal plans.

In effect, Obama would tweak the budget to try to shrink income disparities. But Ryan, he says, would radically change the budget by instituting structural changes in taxes, anti-poverty programs and entitlement programs such as Medicare and Medicaid.

In that sense, Obama's plan could be seen as a less dramatic approach in that it would stay closer to the country's existing path, Viard says. "There's nothing 'socialist' in Obama's budget. It's a commitment to the status quo, with minor changes that he would consider improvements."

It tilts the economy more in the direction of taxing the rich to help the poor in the short term, he adds, but without changing big entitlement programs for the long term.

The relatively minor structural changes disappointed groups hoping for something more dramatic from the White House.

"President Obama's budget unfortunately continues a holding pattern on current federal fiscal policy," said Steve Bell, of the Bipartisan Policy Center. He said the budget fails to "make hard choices and address the fundamental drivers of deficits and debts in years ahead."

But AFL-CIO president Richard Trumka said the budget would strengthen the economy by imposing "fairer taxes" and avoiding "cuts to Medicare beneficiaries or elimination of a separate program for workers who lose their jobs due to trade."

The $3.9 trillion budget plan for fiscal 2015 is projected to produce a $564 billion deficit, down from more than $744 billion this fiscal year. And it's far below the record $1.4 trillion in 2009 — a fiscal year that began when President George W. Bush was in office.

On Wednesday, lawmakers will weigh in. At the Senate Budget Committee, Office of Management and Budget Director Sylvia Burwell will testify, and is likely to get a warm reception from chairwoman Patty Murray, D-Wash., who said Tuesday, "I strongly support the president's proposal."

Then, Wednesday afternoon, Burwell will head over to Ryan's House committee to repeat her performance.

It's not likely her testimony will change any minds on Capitol Hill. Even before she speaks, key congressional leaders have issued their verdicts.

House Speaker John Boehner, R-Ohio, said the White House budget "would hurt our economy and cost jobs." House Budget Committee ranking Democrat Chris Van Hollen of Maryland said it "expands economic growth, makes critical investments in our future, and responsibly reduces the deficit."